This farmer in Emerald, NE is planning to harvest 65,000 bushels of soybeans in the fall, and he estimates his break-even price is $12.00/bu. This break-even price includes his cost of production plus extra funds she needs to pay bills and make long-overdue investments in the farm. Actually, he would welcome some extra money as well, in which case he could make additional investments in the farm that are not too urgent but could be made now if there are funds available.

He is trying to decide whether he should:

• sell all bushels now with futures contracts and/or forward contracts,
• sell a portion of the bushels now with futures contracts and/or forward contracts, and the remaining bushels later, or
• sell nothing now.

He wants to deliver his grain sometime in November, and the grain elevator in his local cash market is offering a forward contract for November 2022 delivery at $13.10/bu. If he prefers to use the futures market, he can hedge his grain with the soybean futures contract for November 2022 delivery, which is trading at $13.95/bu. The size of the futures contract is 5,000 bushels and initial margin is $3,685/contract (which is the same as the maintenance margin).

As a reference, the chart below shows the behavior of the soybean futures price for November 2022 delivery since the beginning of the year until today (July 1), while the following table shows the average weekly basis in November in her local cash market in the last 7 years.

Soybean basis in Emerald, NE in November: 2015 2021

	2015	2016	2017	2018	2019	2020	2021
1st week	0.7200	1.0050	1.1225	1.1550	1.0450	-0.6825	-0.5325
2nd week	0.6975	0.8100	1.1150	1.1750	1.0225	-0.6750	-0.5275
3rd week	0.5975	1.0075	1.0825	1.0500	1.0000	-0.6800	-0.5300
4th week	0.6025	0.9725	0.9988	1.0550	0.9200	-0.6800	-0.5350